Blod-ESS.jpgAuthored by Alex Passantino

Last week, hotels around the country received unexpected visits from investigators of the U.S. Department of Labor’s Wage and Hour Division (WHD).  This week, WHD announced an initiative to investigate restaurants in the Los Angeles area, one of several (including Portland and San Francisco) such initiatives around the nation.  These activities are the latest evidence that WHD’s long-expected aggressive enforcement agenda is finally coming to fruition.

Since the early days of the Obama Administration, WHD has been hiring new investigators –350, according to Solicitor of Labor Patricia Smith.  Now that those investigators have been trained and are ready to hit the streets, WHD can fully implement its strategic enforcement

Among the most critical initiatives WHD is pursuing is one dealing with “fissured” industries.  Fissured industries, according to WHD, are those that rely on subcontracting or, in the case of restaurants and hotels, have numerous different franchising and operating arrangements.  These arrangements — again, according to WHD — result in increased rates of wage and hour violations.

As a result, WHD is focusing a significant portion of its investigative resources on the restaurant and hotel industries.  Typical issues addressed in these investigations include the proper payment of tipped employees, the exempt status classification of office and management employees, uniform deductions, payment of the proper rate for overtime hours (particularly for tipped employees), whether the required notice has been given to tipped employees, and whether the employer has the required posters.  Of course, issues related to timekeeping are also addressed in these investigations.

While these industries have long been among those targeted by WHD, employers in these industries should expect more frequent visits.  Moreover, WHD — as is the case with DOL generally — has adopted more aggressive enforcement tactics.  Whether it is starting investigations with little or no notice, or requiring the payment of liquidated (double) damages to resolve an investigation, or assessing civil money penalties, WHD is using its full arsenal of tools.

One favored tool has been what senior DOL officials have described in various contexts as “shaming.”  Shaming includes issuing press releases and making all violations available in a publicly-searchable enforcement database.  That database has apparently been linked with Yelp! in a recent app known as Eat, Sleep, Shop, which allows consumers to search for restaurants, hotels, and retailers in a location, then view both their Yelp rating and their enforcement history, presumably so the consumers can determine for themselves whether the fact that an assistant manager was erroneously classified as exempt 2 years ago should outweigh the quality of the tiramisu.

The app’s synchronization of quality ratings and enforcement data puts employers’ reputations on the line in a way that simply cannot be duplicated by issuing a press release.  It is at the consumer’s fingertips at the moment the decision is made as to where someone should eat, sleep, or shop.

The — frankly unprecedented — placement of an employer’s reputation on the line (as well as its pocketbook) in an investigation makes it even more critical that employers review their wage and hour practices before WHD shows up at the door.  Employers in the hotel and restaurant industries need to ensure compliance to preserve their reputations.

To do otherwise would be a “shame.”